WEBVTT - Surveillance: Stay The Course, Kantor Says 0:00:02.600 --> 0:00:13.040 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.680 Bloomberg dot Com, and of course, on the Bloomberg. So 0:00:28.840 --> 0:00:31.200 the good news for Prime Minister Boris Johnson is that 0:00:31.240 --> 0:00:34.080 some people believe he might have enough votes for his deal. 0:00:34.200 --> 0:00:36.519 The bad news for the Prime Minister today is that 0:00:36.600 --> 0:00:39.480 hardly anybody knows when Parliament might actually get to vote 0:00:39.520 --> 0:00:41.920 on it. Johnny guests now from London is Edward Evans, 0:00:41.960 --> 0:00:45.760 Bloomberg Managing editor in charge of Brexit. Quite a job, ed, 0:00:45.800 --> 0:00:48.440 So let's talk about it. What happened this past weekend 0:00:48.680 --> 0:00:51.400 and what's the sequencing of events over the next couple 0:00:51.400 --> 0:00:56.560 of days. Parliament on Saturday rejected the deal that Johnson 0:00:56.720 --> 0:00:59.640 struck with Brussels. He will try and put it again 0:01:00.040 --> 0:01:03.560 Parliament today, but in doing so he risks a clash 0:01:03.600 --> 0:01:06.199 with Speaker John Burko. There's a convention in the British 0:01:06.240 --> 0:01:09.320 Parliament that once Parliament has voted on something, you can't 0:01:09.319 --> 0:01:12.959 put it to Parliament again. Nevertheless, the government is going 0:01:13.000 --> 0:01:15.720 to put forward the what's called the Withdrawal Agreement Bill. 0:01:15.800 --> 0:01:18.880 This is the actual piece of legislation that implements breaks 0:01:18.920 --> 0:01:21.520 it to Parliament this week and the idea is to 0:01:21.600 --> 0:01:25.399 get that through the whole of Parliament by October thirty one. Now, 0:01:25.400 --> 0:01:27.200 the problem for Johnson is going to be whether he 0:01:27.240 --> 0:01:30.560 can get both either of those pieces of the legislation through, 0:01:31.240 --> 0:01:33.080 but will probably with the second, whether it's going to 0:01:33.120 --> 0:01:35.720 be subjected to amendments by his opponents. What do we 0:01:35.760 --> 0:01:37.759 know about the numbers at the moment and how they've 0:01:37.840 --> 0:01:41.760 changed since this past weekend. Well, the numbers are very 0:01:42.000 --> 0:01:44.720 very close. It has to be stressed. To get his 0:01:44.800 --> 0:01:47.400 deal over the line, Johnson needs to get sixty one 0:01:47.480 --> 0:01:50.360 waiverers to fall in line behind. Now on our estimates, 0:01:50.440 --> 0:01:54.040 we think he's got sixty two. Foreign sectually dominant RAB 0:01:54.200 --> 0:01:56.240 over the weekend is saying that the government thinks it 0:01:56.400 --> 0:01:59.280 has the numbers to do it. But you'd expect a 0:01:59.360 --> 0:02:01.800 government in to say that. How often do you hear 0:02:01.800 --> 0:02:03.640 a government in US to say they expect to lose 0:02:03.680 --> 0:02:06.360 a piece of legislation in Westminster? I think the only 0:02:06.360 --> 0:02:08.440 safe answer is that it's going to be very very 0:02:08.520 --> 0:02:11.519 close and we're in for ten days of intense parliamentary 0:02:11.520 --> 0:02:13.960 credit warfare. Here. A lot of rumors over the last 0:02:13.960 --> 0:02:16.640 couple of days about the DUP, the Democratic Universt Party 0:02:16.680 --> 0:02:18.919 and what they'll be pushing for in the next four 0:02:19.040 --> 0:02:22.079 hours eight hours and whether they'll team up with Labor 0:02:22.120 --> 0:02:25.160 at what do we know about that? Yeah, this is 0:02:25.160 --> 0:02:28.600 a DP. They rejected Boris Johnson's initial deal. Their argument 0:02:28.720 --> 0:02:31.400 they do not want to see Northern Ireland treated differently 0:02:31.440 --> 0:02:35.440 to the rest of the UK. Now Johnson has because 0:02:35.440 --> 0:02:37.600 he wants to leave the EU customs you need. He 0:02:37.840 --> 0:02:40.560 that Ireland is dead opposed to that idea, so he 0:02:40.600 --> 0:02:44.560 has had to fudge a Northern Ireland status essentially like 0:02:44.680 --> 0:02:46.799 the UK will leave the customs you do, but it 0:02:46.800 --> 0:02:50.320 will be forced to follow some new customs rules. Now 0:02:50.600 --> 0:02:54.480 do you teem in? MPP says that the government party 0:02:54.639 --> 0:02:59.440 meeting with with to discuss potential amendments to the government's legislation, 0:02:59.600 --> 0:03:01.960 but he's ruled out back in any need to keep 0:03:02.040 --> 0:03:06.240 the UK in the European Union's customs unit. That's something 0:03:06.240 --> 0:03:09.040 that Labor has been looking to do. Ever very quickly here, 0:03:09.040 --> 0:03:11.400 we're gonna we're gonna do a ballet here and I'm 0:03:11.440 --> 0:03:14.080 beginning to your discussion of November there will be a 0:03:14.120 --> 0:03:21.239 general election. Who wants a general election right now? Boris 0:03:21.320 --> 0:03:26.240 Johnson in short? In short, but nobody else but Johnson. 0:03:26.400 --> 0:03:28.600 It's it's the way that he can get this through, 0:03:28.680 --> 0:03:32.040 go to the country, get a majority in parliament that 0:03:32.120 --> 0:03:35.920 allows him to his Brexit deal through um. Everybody else 0:03:36.080 --> 0:03:39.200 is very much more ambivalent about it, Labor. If you 0:03:39.240 --> 0:03:41.360 look at where they're Poland, Corpin is no real in 0:03:41.440 --> 0:03:44.400 no real position to go to the country. His party 0:03:44.480 --> 0:03:48.240 is divided on Brexit and he resisted any chance to 0:03:48.280 --> 0:03:51.240 do that. To do that so far Everard Evans, thank you. 0:03:51.360 --> 0:03:57.320 Something really should say in working truly there's a cliche, 0:03:57.400 --> 0:04:14.000 but they are ye. Let us continue this discussion. Maybe 0:04:14.040 --> 0:04:16.480 brought it up. Meredith Sumter with us with your Asia group. 0:04:16.600 --> 0:04:18.520 It was a joy to have Ian Bremer with us 0:04:18.600 --> 0:04:22.440 last week, and we're raving about Meredith Sumpter's abilities not 0:04:22.560 --> 0:04:25.400 only on Asia and on China, but really with a 0:04:25.440 --> 0:04:28.280 holistic view for your Asia group. She joins us from 0:04:28.320 --> 0:04:32.760 our studios in Washington. Uh, Meredith on on China right now, 0:04:33.000 --> 0:04:36.000 what is the mood that you've seen within the Chinese media, 0:04:36.080 --> 0:04:41.000 the Chinese speaking media. The Chinese speaking media is really 0:04:41.040 --> 0:04:46.279 of of two minds. One, they are messaging constructively about 0:04:46.520 --> 0:04:50.640 the interim deal that has been reached in principle with 0:04:50.720 --> 0:04:53.800 the United States, and all eyes are on some kind 0:04:53.839 --> 0:04:58.039 of arrangement being agreed to ahead of the APEC meeting 0:04:58.080 --> 0:05:01.279 where Presidents She and Trump will meet UH and signed 0:05:01.360 --> 0:05:05.880 the agreement. On the other hand, they're also messaging calm 0:05:06.440 --> 0:05:08.880 UH and a medium to long term view of how 0:05:08.920 --> 0:05:10.840 they're managing the economy. So we've seen a lot of 0:05:10.920 --> 0:05:15.080 hyperventilation in the markets about China being at six percent growth. 0:05:15.080 --> 0:05:17.240 This is this is something that look, you know, Chinese 0:05:17.240 --> 0:05:19.320 contact on me. Look, we've been actually been below six 0:05:19.360 --> 0:05:22.719 percent growth for some time. Nudge nudge, right, So they're 0:05:22.720 --> 0:05:26.000 they're looking to just manage those expectations that higher quality 0:05:26.080 --> 0:05:30.400 growth means a lower growth rate for China, and look 0:05:30.440 --> 0:05:33.080 that with the trade confrontation going on, of course you're 0:05:33.120 --> 0:05:35.240 going to see a downward pressure on their growth. I 0:05:35.279 --> 0:05:37.160 want to bring what you just said with your your 0:05:37.200 --> 0:05:40.599 core expertise on Asia over to Brexit, because it's the 0:05:40.680 --> 0:05:44.159 same thing they're managing. The chaotic message in the United 0:05:44.240 --> 0:05:47.400 Kingdom is well, do you just assume damp and growth 0:05:47.400 --> 0:05:50.520 in the United Kingdom for the same reasons, frankly as China, 0:05:50.600 --> 0:05:54.839 which is just a certain level of chaos the UK 0:05:55.000 --> 0:05:57.200 economy is. They're going to have the government's going to 0:05:57.320 --> 0:05:59.400 have to find some white Look like all the focus 0:05:59.400 --> 0:06:01.240 has been on Yal or new deal. We're gonna get 0:06:01.240 --> 0:06:04.279 this through. And as soon as this gets wrapped, then 0:06:04.360 --> 0:06:07.200 I think you're going to see Westminster focusing on, oh 0:06:07.240 --> 0:06:08.599 my goodness, now what do we have to do? And 0:06:08.640 --> 0:06:12.320 not just on the economic front, like look, negotiating trade 0:06:12.320 --> 0:06:16.040 agreements takes time, but also they're going to have an 0:06:16.040 --> 0:06:20.080 eye towards Northern Ireland and towards Scotland as well to 0:06:20.400 --> 0:06:22.480 think about what are the medium to long term effects 0:06:23.040 --> 0:06:27.359 of all political effects of leaving leaving the European Union 0:06:27.400 --> 0:06:30.000 on those two important parts. And jump in here because 0:06:30.080 --> 0:06:32.680 with all this going on with burkau at to thirty, 0:06:32.760 --> 0:06:37.000 there's a court ruling in Scotland basically out of nowhere. 0:06:37.040 --> 0:06:39.839 I mean, Meredith, are we gonna end up talking about 0:06:39.839 --> 0:06:44.000 Scotland having an independent vote leave the United Kingdom? I 0:06:44.040 --> 0:06:46.479 do think momentum is heading that direction, but listen, I 0:06:46.480 --> 0:06:48.359 want to give you a quick update on what the 0:06:48.360 --> 0:06:51.440 Eurasia Group call is. It has been this way since 0:06:51.560 --> 0:06:55.440 actually um Saturday, and that in lifting the threat of 0:06:55.480 --> 0:06:58.960 a no deal, Oliver Letwin, who will now vote for 0:06:59.000 --> 0:07:02.040 the agreement very well be remembered. Is the man who 0:07:02.040 --> 0:07:04.599 paved the way for deal approval. Now, why do we 0:07:04.640 --> 0:07:06.760 say that in our call is we think that Boris 0:07:06.839 --> 0:07:10.400 is within touching distance of getting the majority that he needs. 0:07:11.640 --> 0:07:14.280 So for those MPs who wanted to take no Deal 0:07:14.360 --> 0:07:16.440 off the table, we think that they will now be 0:07:16.600 --> 0:07:20.080 more ready to vote for a deal. This includes seventeen 0:07:20.760 --> 0:07:23.640 former Tories who lost whip for back in the Band Act. 0:07:24.080 --> 0:07:27.240 Same for the labor backbenchers that the government has now 0:07:27.280 --> 0:07:30.000 been willing, we think that Boris needs an additional five 0:07:30.080 --> 0:07:32.600 to six more labor votes to get to the number 0:07:32.640 --> 0:07:35.280 that he needs. Meredith. What is lost on a lot 0:07:35.280 --> 0:07:38.160 of people is that this is not the beginning of 0:07:38.160 --> 0:07:40.200 the end. This is the end of the beginning. This 0:07:40.280 --> 0:07:41.679 is going to go on for a whole lot longer. 0:07:41.720 --> 0:07:44.000 Even once this deal passes, we then need to negotiate 0:07:44.040 --> 0:07:46.600 with Europe what the future relationship looks like. Meredith. How 0:07:46.680 --> 0:07:49.800 much longer is this going to go on for It 0:07:49.800 --> 0:07:53.200 could take a couple of years, frankly, and during that 0:07:53.280 --> 0:07:55.320 period of time, you know you're gonna have a year 0:07:55.320 --> 0:08:00.520 of transition and the governments on both sides will be 0:08:00.600 --> 0:08:03.000 trying to figure out a way to mitigate the negative 0:08:03.040 --> 0:08:06.920 effects of the UK leaving while also they're preparing their 0:08:06.920 --> 0:08:09.400 populations for what comes next. And this is not just 0:08:09.480 --> 0:08:13.440 trade and investment, but it's also workforce issues. People are 0:08:13.480 --> 0:08:16.200 going to be dislocated and we'll have to make plans 0:08:16.240 --> 0:08:18.280 for their future. So you're gonna see all this attention 0:08:18.280 --> 0:08:19.680 that we've had on are we going to get this 0:08:19.760 --> 0:08:22.640 deal passed? It's now going to be turned to now 0:08:22.720 --> 0:08:24.600 to what do we do to move forward at a 0:08:24.640 --> 0:08:26.720 time when the year Zone growth is slowing and there's 0:08:26.760 --> 0:08:29.400 concerns about the political will of country governments to do 0:08:29.480 --> 0:08:33.319 the fiscal stimulus necessary to keep these key economies out 0:08:33.320 --> 0:08:36.920 of recession. Meredith, thank you so much, too, Short group 0:08:36.960 --> 0:08:41.800 with us today, greatly appreciate the perspective there on England. 0:08:56.000 --> 0:08:58.800 One of our most popular guest darks the door, Charles Cancer, 0:08:58.880 --> 0:09:03.560 is a Newberger Berman looking at along Short always gives 0:09:03.640 --> 0:09:07.160 us good spirit. On the UH, the equity markets you 0:09:07.200 --> 0:09:10.120 mentioned earlier to me, Charles, the idea that the gloom 0:09:10.120 --> 0:09:13.520 out there is tangible give us the level of gloom 0:09:13.559 --> 0:09:17.000 that you see right now. I think gloom in the 0:09:17.000 --> 0:09:22.199 equity market UM. Despite ten years of excess returns for 0:09:22.320 --> 0:09:26.480 both equities and credit, gloom is ubiquitous. I think you 0:09:26.480 --> 0:09:29.400 see it in valuations. You see it in the record 0:09:29.440 --> 0:09:32.280 amount of cash that flowed into money market funds the 0:09:32.360 --> 0:09:35.560 last six months. I think it's about three billion dollars, 0:09:35.600 --> 0:09:38.080 which is similar to what you saw in two thousand 0:09:38.160 --> 0:09:42.080 and eight. So there's there's no lack of worry UM 0:09:42.120 --> 0:09:45.640 in the stock market, whether it be global manufacturing recession, 0:09:45.720 --> 0:09:51.280 slow in earnings, impeachment, Trump, brexit, pick your poison. UM. 0:09:51.320 --> 0:09:54.960 I think. I think it's not lost on on equity 0:09:55.040 --> 0:09:59.800 valuations UM in general, and I would say UM because 0:09:59.800 --> 0:10:04.360 of that, for anyone that has an investment time arising 0:10:04.400 --> 0:10:07.319 that can be measured in five and ten years UM, 0:10:07.360 --> 0:10:09.679 I would just urge folks to stay the course because 0:10:09.679 --> 0:10:11.920 I think the next five to ten years will produce 0:10:12.520 --> 0:10:16.600 UM at minimum average equity like returns, which will more 0:10:16.640 --> 0:10:18.840 than likely get the job done for most. Well, let's 0:10:18.840 --> 0:10:22.520 talk about the risk reward proposition going into next year, 0:10:23.040 --> 0:10:26.520 the low single digits, low single digit profit row? Does 0:10:26.559 --> 0:10:31.120 that get it done? Is that good enough? So? UM, 0:10:31.280 --> 0:10:34.400 next year is going to have a lot of idiosyncratic risk. 0:10:35.040 --> 0:10:37.040 It's not lost on you that we have an election 0:10:37.080 --> 0:10:41.200 at the back end of But I need to say this. 0:10:42.679 --> 0:10:46.640 The ability of anyone in this chair to predict the 0:10:46.760 --> 0:10:51.240 next one year return is a complete random walk. If 0:10:51.280 --> 0:10:53.760 you believe in valuations, I can show you the data, 0:10:54.040 --> 0:10:57.360 whether the starting multiple is high or low. Prospective one 0:10:57.440 --> 0:11:01.400 year returns totally unpredicted. I know everyone wants to talk 0:11:01.440 --> 0:11:04.080 about the next one year. I beg folks to look 0:11:04.080 --> 0:11:08.680 a little longer. And because of the amount of pessimism 0:11:08.720 --> 0:11:12.679 that is in the market today, UM, the likelihood that 0:11:13.040 --> 0:11:17.000 that that that we enjoy attractive five to tenure returns 0:11:17.160 --> 0:11:19.480 is very high. So chance this is really important for 0:11:19.480 --> 0:11:21.679 anyone that stumbled across this channel and thought, you know, well, 0:11:21.720 --> 0:11:24.079 I'll listen to this and I'll listen to this guy 0:11:24.160 --> 0:11:26.959 talking about investing. I can't predict the next year with 0:11:27.000 --> 0:11:29.760 any accuracy. Try and predict the next five years because 0:11:29.760 --> 0:11:33.360 that's easier. Yes, that sounds counterintuitive to some people who 0:11:33.360 --> 0:11:35.560 perhaps aren't in the market with the experience that you have. 0:11:36.040 --> 0:11:39.120 Why does that make sense? It's it's all driven by 0:11:39.200 --> 0:11:43.680 my philosophy um that starting points on valuation are the 0:11:43.760 --> 0:11:47.760 most critical inputs and the more reasonable the starting point 0:11:47.960 --> 0:11:51.480 is for anyone that has a long term investment horizon, Um, 0:11:51.520 --> 0:11:54.120 the greater the likelihood that you're gonna enjoy at least 0:11:54.160 --> 0:11:57.559 average equity like returns. And I can tell you based 0:11:57.600 --> 0:12:00.640 on our work based on whether where valuations are, which 0:12:00.640 --> 0:12:03.520 I know folcusing stock prices are high. Yes, stock prices 0:12:03.559 --> 0:12:06.280 are high, but earnings growth has has more than caught 0:12:06.360 --> 0:12:09.000 up with that. For anyone that believes that has a 0:12:09.080 --> 0:12:14.800 cash flow earnings, economic profit valuation mindset, today's starting point 0:12:15.360 --> 0:12:18.600 is more than attractive for anyone that has a five 0:12:18.679 --> 0:12:21.920 to ten investment aising heart of this, this is so important. 0:12:22.040 --> 0:12:24.079 The heart of this is Johnny has a good question. 0:12:24.120 --> 0:12:26.719 They're in the blended market. You're not looking at the 0:12:26.760 --> 0:12:30.400 blended market. You're looking at what five or ten or 0:12:30.600 --> 0:12:34.400 fifteen percent of the stocks that are out there. The goal, 0:12:34.920 --> 0:12:38.200 increasingly and thankfully for the first time in ten years, 0:12:38.520 --> 0:12:41.680 has moved away from treasury yields being a put on 0:12:41.720 --> 0:12:45.920 the market to actually understanding your company's UM understanding how 0:12:45.920 --> 0:12:49.120 they're the deploy capital and the markets and the growth 0:12:49.160 --> 0:12:51.400 that they're going after. So for us, it's kind of 0:12:51.600 --> 0:12:53.880 like kids in a candy store right now because for 0:12:53.960 --> 0:12:59.599 the first time in a while, there's wide dispersion between securities, 0:12:59.600 --> 0:13:03.079 between growth and value, between large and small, and so 0:13:03.160 --> 0:13:07.439 for our job, we feel like finally, UM certainly running 0:13:07.440 --> 0:13:10.040 along short. We're playing a little golf. We playing golf 0:13:10.040 --> 0:13:12.480 with a little wind. It's Monday, nobody's listening. Give us 0:13:12.520 --> 0:13:16.280 one idea, Give us one company that needs the cantor prison, 0:13:17.120 --> 0:13:19.520 one company that needs to just give us the name. 0:13:19.520 --> 0:13:22.680 I don't know what about Brookville, ASCID Management, the real 0:13:22.800 --> 0:13:28.720 estate people, real estate infrastructure UM to buy the Montreal Canadians. 0:13:28.960 --> 0:13:32.199 They're probably not going to buy the Montreal Canadians UM, 0:13:32.240 --> 0:13:36.320 but they all about alternative assets that own scale and 0:13:36.400 --> 0:13:40.720 scope in long duration assets with inflation protection that most 0:13:40.760 --> 0:13:45.000 folks don't. Their tenure track record is spectacular and there's 0:13:45.040 --> 0:13:47.440 no reason to believe that that the next ten years 0:13:47.440 --> 0:13:51.520 wouldn't be as good per year with five year dividend growth. 0:13:51.600 --> 0:13:54.679 Charles Cantor, thank you so much, New New Burger Berman 0:13:54.720 --> 0:13:56.680 there we didn't get to Amazon will do that next time. 0:13:57.800 --> 0:14:13.280 A big week of earnings ahead. Let's bring in a guest, yeah, 0:14:13.320 --> 0:14:16.240 with Laurie Calvassin or ILLBC Caunpital Markets, head of US 0:14:16.280 --> 0:14:18.600 equity strategy. Laurie, do you find that that some people 0:14:18.600 --> 0:14:23.440 have struggled to get over Q four even twelve months later? 0:14:23.840 --> 0:14:26.600 I think, especially as we flipped the calendar into four Q, 0:14:26.840 --> 0:14:29.760 those scars, as you mentioned, run pretty deep. Um. One 0:14:29.760 --> 0:14:31.720 thing we noticed if you look back at sort of 0:14:31.800 --> 0:14:35.000 late August early September, we had that weird style rotation 0:14:35.040 --> 0:14:37.280 in the market that felt to a lot of people 0:14:37.600 --> 0:14:39.800 similar to what we had seen late last year when 0:14:39.800 --> 0:14:41.760 people were just starting to take profits on the names 0:14:41.760 --> 0:14:44.320 that had done really well. Now that's all died down, 0:14:44.920 --> 0:14:46.600 but there was a little bit if I wouldn't quite 0:14:46.640 --> 0:14:48.400 call it panic, but there was a high level of 0:14:48.440 --> 0:14:50.960 nervousness when you saw that profit taking trade happen. You 0:14:50.960 --> 0:14:53.920 think the position unwind still has more to go. What 0:14:54.160 --> 0:14:56.400 me through that? So you know, we're we're a little 0:14:56.400 --> 0:14:59.000 bit less focused on the growth value discussion right now. 0:14:59.440 --> 0:15:01.360 But in turn is of looking at sectors. You know, 0:15:01.400 --> 0:15:03.520 one area that we've really been trying to focus people 0:15:03.560 --> 0:15:06.200 has been on industrials, and we're quite simply looking at 0:15:06.240 --> 0:15:08.720 it and saying, we've been fighting the trade war here 0:15:08.720 --> 0:15:10.680 for a year and a half. You're at financial crisis 0:15:10.720 --> 0:15:13.000 lows relative to the S and p um. You know, 0:15:13.080 --> 0:15:15.440 so far earnings have been good. We'll see if that continues. 0:15:15.480 --> 0:15:17.440 But really we feel like five years down the road, 0:15:17.480 --> 0:15:19.080 we're all going to look back at this period in 0:15:19.120 --> 0:15:21.000 time and say we should have been buying the machinery 0:15:21.040 --> 0:15:22.640 stocks in the middle of the trade war. This is 0:15:22.640 --> 0:15:25.080 your big cyclicals called at the moment, right right, And 0:15:25.280 --> 0:15:27.520 I would just stress you know, we have enough nervousness 0:15:27.520 --> 0:15:29.920 of our own. We we don't like where valuations are. 0:15:29.920 --> 0:15:32.640 We have some positioning concerns. We are keeping some overweights 0:15:32.680 --> 0:15:35.040 on defensives things like reads and utilities, but we want 0:15:35.040 --> 0:15:37.400 those to be very balanced with cyclicals that we think 0:15:37.400 --> 0:15:39.680 have been de risked, like financials and industrial. Yes, so 0:15:39.720 --> 0:15:41.760 I'm looking at some of the otherweights in the large 0:15:41.760 --> 0:15:43.920 cap sectors that you like at the moment and struggle 0:15:44.000 --> 0:15:48.520 to reconcile the overwing financials with the position and utilities. 0:15:48.560 --> 0:15:51.080 Those two things walk me through why you've you're strong 0:15:51.160 --> 0:15:52.800 on one, is strong on the other. I think we 0:15:52.880 --> 0:15:55.240 think about them in terms of different time horizons. So 0:15:55.280 --> 0:15:57.640 it feels like utilities and reads are the things that 0:15:57.680 --> 0:15:59.840 we want in our portfolio for say the next six 0:15:59.840 --> 0:16:02.400 to twelve months, you know, and I would emphasize probably 0:16:02.400 --> 0:16:04.120 more of the sixth than the twelve. But when we 0:16:04.160 --> 0:16:07.240 think about things like financials and industrials, that feels more 0:16:07.280 --> 0:16:09.520 like a longer term call where we're really gonna wish 0:16:09.520 --> 0:16:12.400 we have been um when we look back in a year. Fortunately, 0:16:12.400 --> 0:16:14.720 industrials are working right now. We'll see if that last 0:16:14.800 --> 0:16:17.960 I just did October to October percent per year over 0:16:17.960 --> 0:16:20.400 the last four years, fourteen percent per year over the 0:16:20.440 --> 0:16:22.800 last three years, ten percent per year over the last 0:16:22.840 --> 0:16:27.400 two years, ten percent over the last year as well? Forward, 0:16:27.880 --> 0:16:31.320 are you gonna make double digit equity returns with the 0:16:31.360 --> 0:16:34.480 same stocks of that one year, two year, three year, 0:16:34.560 --> 0:16:37.080 four year excellence. I think when we we sort of 0:16:37.200 --> 0:16:39.680 peer into twenty and we start to think about what's 0:16:39.680 --> 0:16:41.040 to come, we feel like you're going to have a 0:16:41.080 --> 0:16:43.320 whole heck of a lot of less multiple expansion than 0:16:43.360 --> 0:16:45.200 what we've had. I mean, we've had just tremendous So 0:16:45.240 --> 0:16:47.320 what does that mean? Because you see how she goes 0:16:47.360 --> 0:16:51.400 partial differentials on a Monday, just like multiple expansion. Is 0:16:51.440 --> 0:16:53.720 it a price movement or is it an earning spool? 0:16:53.840 --> 0:16:56.440 So basically, this year we're going to have flattish earnings growth, 0:16:56.440 --> 0:16:58.320 it looks like. But we've had this tremendous move in 0:16:58.360 --> 0:17:00.920 the equity market. It's been multiplex pansion from the FED. 0:17:01.320 --> 0:17:03.000 Um the next year, we don'k you're going to get 0:17:03.040 --> 0:17:04.280 a lot less of that. We think the FED is 0:17:04.320 --> 0:17:06.119 probably going to be on pause. We're looking for about 0:17:06.119 --> 0:17:08.720 five six percent earnings growth next year, so you know, 0:17:08.720 --> 0:17:10.879 I would say less exciting than where we've been. So 0:17:10.880 --> 0:17:13.760 what's a twenty multiple stock? The price to earnings, price 0:17:13.840 --> 0:17:16.560 to cash flow is to zero? Where is that migrate 0:17:16.640 --> 0:17:19.159 to twelve months out? I think it's going to depend 0:17:19.200 --> 0:17:21.239 sector by sector. You know, I'll tell you some some 0:17:21.320 --> 0:17:23.560 of the areas where I am frankly very worried about 0:17:23.560 --> 0:17:25.560 the multiples or things like software stocks, and a lot 0:17:25.560 --> 0:17:28.679 of those are arguably Microsoft. Well I can't get into 0:17:28.720 --> 0:17:31.280 individual names, but yeah, but come on, some of these 0:17:31.280 --> 0:17:33.359 stocks are moon shots. You're telling me to sell the 0:17:33.359 --> 0:17:36.399 moon shot. Um. I don't ever want to be recommending 0:17:36.400 --> 0:17:39.320 to people that you buy things that are incredibly overvalued, 0:17:39.400 --> 0:17:42.359 incredibly over owned in Hedge fun Land at a time 0:17:42.440 --> 0:17:44.919 when we are starting to see pockets of the market 0:17:45.280 --> 0:17:49.000 factor inside what's under own, what's under owned in hegel 0:17:49.400 --> 0:17:51.320 So when we look at the industrial space, we think 0:17:51.320 --> 0:17:53.480 that one has become a lot less owned. Have you 0:17:53.520 --> 0:17:58.040 ever been to Hedge fund It's a Disney World, isn't it. 0:17:58.080 --> 0:17:59.600 You go down there and it's like a one week 0:17:59.680 --> 0:18:02.160 lacrois as campings of Disney as it is four days 0:18:02.520 --> 0:18:04.520 and you know your daughter plays lacrosse and you go 0:18:04.560 --> 0:18:06.320 to Hedge fund Land. Well, let me give you one 0:18:06.359 --> 0:18:08.440 stat on the industrials. If you look at cell side 0:18:08.440 --> 0:18:12.959 net by ratings, they are right back down to type lows. Now, 0:18:12.960 --> 0:18:15.120 I don't know what three thirteen neaps are gonna look 0:18:15.119 --> 0:18:16.679 like for three Q yet we'll have to see that 0:18:17.240 --> 0:18:20.280 jargon in the last three sentences there, what's that let's 0:18:20.320 --> 0:18:23.359 let's let's let's un what do they say, let's unwrap that? 0:18:23.520 --> 0:18:26.640 Unwrap it on cell side? What if you get cell 0:18:26.680 --> 0:18:29.080 side net by ratings? So just a gauge. So that's 0:18:29.119 --> 0:18:31.560 like the analysts and what they think. It's looking at 0:18:31.560 --> 0:18:33.960 the analysts. It's my favorite way to gauge positioning because 0:18:34.080 --> 0:18:36.560 number one, I think it aggregates what you're seeing from 0:18:36.680 --> 0:18:40.040 cell sider's, hedge funders, mutual fund investors. Everybody's kind of 0:18:40.040 --> 0:18:42.359 baked into that number in terms of what they purely feel. 0:18:42.600 --> 0:18:44.720 But we can also look at that on a daily basis, 0:18:44.760 --> 0:18:46.960 so we get a very very fresh read. You are 0:18:47.000 --> 0:18:49.199 back down to historical lows, which is in line with 0:18:49.240 --> 0:18:51.520 twenty six teen lows. That's about as washed out as 0:18:51.520 --> 0:18:54.560 anything we've seen. Consumer staples, by the way, we're right 0:18:54.560 --> 0:18:56.240 there a year ago. That was one of the reasons 0:18:56.280 --> 0:18:58.359 we liked staples last year. Let's talk about industrials a 0:18:58.400 --> 0:18:59.639 little bit more, because I know you've got to run 0:18:59.640 --> 0:19:02.120 at accoun per minutes. I'm looking at the economic data 0:19:02.200 --> 0:19:05.199 worldwide at the moment. The South Korean export data was terrible. 0:19:05.640 --> 0:19:09.080 The Japanese export data wasn't great either. The economic data 0:19:09.520 --> 0:19:12.520 still without much conviction. I don't think many people can 0:19:12.520 --> 0:19:14.639 make the argument that we've started to bottom out. I 0:19:14.720 --> 0:19:16.800 think that's a low conviction. Cool, So what do you 0:19:16.840 --> 0:19:19.000 see an industrials Apart from the valuation? Why do you 0:19:19.000 --> 0:19:21.159 see stability? Well, the other thing we've noticed, if you 0:19:21.160 --> 0:19:22.960 look at the rate of upward revision. So it's a 0:19:22.960 --> 0:19:25.960 way to gauge sentiment around earnings that's been extremely low. 0:19:26.000 --> 0:19:27.639 It's been one of the sectors where we've seen the 0:19:27.640 --> 0:19:31.520 most downward revisions coming into this reporting season. Areas like technology, 0:19:31.520 --> 0:19:35.000 consumer discretionary. You just haven't seen quite as many. And so, 0:19:35.080 --> 0:19:36.960 you know, the other thing we've been saying about the 0:19:36.960 --> 0:19:39.879 the economy and the broader outlook is if we lose 0:19:39.960 --> 0:19:43.320 this economy. Everyone already knows the manufacturing sector is weak. 0:19:43.520 --> 0:19:46.840 The consumer resiliency thesis is what's at risk. We haven't 0:19:46.880 --> 0:19:49.080 seen the downward revisions there. We don't see the washed 0:19:49.080 --> 0:19:51.720 out valuations there, we don't see the washed out sentiment there. 0:19:52.040 --> 0:19:54.560 So if we see a tipping point as opposed to 0:19:54.640 --> 0:19:56.800 a turning point out of a growth scare, we think 0:19:56.840 --> 0:20:00.119 there's more risk in areas like consumer was per all 0:20:00.160 --> 0:20:03.199 He say, well, Tom is still very bullish on the 0:20:03.240 --> 0:20:05.560 economy for next year. But you know, if you talk 0:20:05.640 --> 0:20:07.480 to him, he will tell you that the risk that 0:20:07.520 --> 0:20:10.600 we talk ourselves into a recession has risen. Um So 0:20:10.680 --> 0:20:12.439 I think he's still in the bullish camp, but he 0:20:12.520 --> 0:20:14.760 has he has tempered that a little bit. Great to 0:20:14.800 --> 0:20:17.359 see you, She used to go. She's got to go. 0:20:17.760 --> 0:20:38.680 We've gotta let it. Govley's out front. This is a joy. 0:20:38.840 --> 0:20:43.960 This is, without question, the quietest guy in New York. 0:20:44.160 --> 0:20:46.719 It is the name you don't know. You know Hurst, 0:20:46.800 --> 0:20:49.359 of course, and all that Frank Bennett has done for 0:20:49.400 --> 0:20:54.040 them in the years. His leadership at New York Presbyterian 0:20:54.280 --> 0:20:58.000 and at Lincoln Center particularly has been absolutely profound. And 0:20:58.040 --> 0:21:01.000 he has put out a book that's based on culture, 0:21:01.040 --> 0:21:03.440 which is something to talk about right now. But I 0:21:03.440 --> 0:21:05.320 have to go because I'm in the room with Paul Sweeney, 0:21:05.359 --> 0:21:08.680 who's expert on media. I gotta go to your your 0:21:08.800 --> 0:21:14.240 harsh negotiating tactics. Here. Lb j'son a Lincoln, bombing down 0:21:14.280 --> 0:21:17.960 the road with one hand, negotiating in a Lincoln out 0:21:17.960 --> 0:21:20.280 in the l b J ranch. Dick, what do you 0:21:20.320 --> 0:21:24.439 think our TV station and Austin is worth? Excuse me, Lyndon, 0:21:24.760 --> 0:21:26.680 I want to take a picture of that bowl over 0:21:26.720 --> 0:21:29.720